Melbourne property deal rocks Malaysian government

John Garnaut, Nick McKenzie, Richard Baker

The Malaysian Prime Minister has been forced to order an investigation into his own government's role in the allegedly corrupt payment of $4.75 million emerging from the sale of a Melbourne student accommodation block.

And the Papua New Guinea government is also under pressure after revelations on Wednesday that people close to the Prime Minister were giving detailed instructions in how to remove corruptly obtained funds from the country.

A Fairfax Media investigation into corrupt offshore dealings with Australia on Tuesday sparked a political firestorm that threatens to engulf the prime ministers of two countries.

The searing public and internal responses in Malaysia and Papua New Guinea have also raising the heat on the Abbott government, which relies on the leaders of both countries to support its counter-terrorism and border protection policies.

Malaysia's Prime Minister Najib Abdul Razak and Papua New Guinea's Prime Minister Peter O'Neill have been forced to confront probity scandals, revealed by Fairfax Media, which strike particularly close to both men.

PNG"s top corruption fighter, Sam Koim, called for Australian investigators to conduct "serious investigations" into dealings that implicate Mr O'Neill, whose close associates have been caught on camera explaining how to pay bribes and launder proceeds in Australia.

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But he said he feared that Australia's commitment to clean governance would be undermined by Mr O'Neill's support for Australia's asylum seeker detention centre in Manus Island.

"Is corruption not an important issue for Australia?" he told Fairfax Media. "Australia should not leverage all issues with PNG including corruption and money laundering issues against the Manus Island deal."

Malaysia's Mr Najib, meanwhile, rushed to announce a probe into all aspects of Fairfax Media reports that detailed how Malaysian officials arranged a $4.75 million kick-back on a Melbourne property deal.

"In relation to the allegation that a few individuals are involved in corruption in the Melbourne property deal, the authorities here will investigate in depth," said Mr Najib, on his Facebook page.

"If there is any wrongdoing and abuse of funds, action will be taken," he said.

Mr Najib's comments were pre-empted by the head of the agency directly involved, a rural development agency called MARA, which was apparently the victim of the corrupt dealings.

MARA chairman Annuar Musa said all its investment decisions had to be by the Finance Ministry or the government economic council, both of which are headed by Prime Minister Najib.

"It is part of the procedure," he told reporters at a hastily convened press conference in Kuala Lumpur.

The MARA chairman said he had not been aware of kickbacks arranged by the heads of his agency's investment arm, who he said had seven days to explain themselves.

"MARA Inc officials have been given seven days to response to the allegations in writing," he said.

An audit into the agency's investment arm, MARA Inc, had been under way but he was not aware of any kickbacks, he said. Information from the internal audit "was not as detailed as what was reported by The Age," he said, saying he would leave "no stone unturned".

"The detailed revelation by The Age raises serious allegations of money laundering, corruption and criminal breach of trust on the part of MARA officials, particularly those of its subsidiary MARA Inc," they said in a joint statement.